The Accounting World | Revisiting the Provision of Statutory Minimum Paid Up Capital

The Accounting World Magazine:

Revisiting the Provision of Statutory Minimum Paid Up Capital

Article Details

Pub. Date	:	April, 2009
Product Name	:	THE ACCOUNTING WORLD
Product Type	:	BUSINESS LAW
Product Code	:	AWBL10904
Author Name	:	G Mahaveer
Availability	:	YES
Subject/Domain	:	Finance
Download Format	:	PDF Format
No. of Pages	:	7

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	Abstract
	The issuance of amended Section 3 of Companies Act 1956, makes statutory minimum paid up capital as sine qua non for any registered Company. But other provisions in force, such as Sections 12, 37(1), 160 and Schedule X, etc., still adumbrates the existence and formation of Companies sans Share Capital. Though at present the contradiction stands harmonized by the general rescuing clause of Section 3`Unless the context otherwise requires', still the need is to amend Section 3 in order to specifically exempt companies without Share Capital from the purview of Minimum Capitalization norms just on the lines of how Section 25 Companies are exempted.

Description

The core impact of various amendments effected through Section 3 of the Companies Act, 1956, vide Companies Amendment Act, 2000, is that every Private and Public Company shall have a Statutory Minimum paid-up Capital of Rs. 1 lakh and Rs. 5 lakh respectively. The existing companies on December 13, 2000 sans statutory minimum were given a period of 2 years to raise their paid-up capital, whereas new companies to be incorporated had to possess it during their incorporation.

The said amendment effected in the year 2000 leads to a derived opinion that a corporate form of business cannot be called or registered as a Private or Public Company if it does not have a share capital. But this considered view is in clear contradiction to the settled legal intention of other existing provisions that stipulates the very existence of Companies without share capital.

Section 12 of the Companies Act, 1956, provides that all Private and Public Companies shall necessarily belong to any of the following categories

Keywords

The Accounting World Magazine, Minimum Capitalization Norms, Corporate Business, Public Companies, Private Companies, Memorandum of Association, Articles of Association, Share Capital, Statutory Minimum Capitalization Norms, Statutory Minimum Wage, Statutory Provisions.